GOP tax cut plan denounced

A Republican plan to cut income taxes across the board encountered heavy DFL opposition Monday, with Gov. Mark Dayton hammering at the GOP for proposing tax cuts when the state faces a massive deficit.

The income tax savings for Minnesota wage earners would range from a few dollars at the low end to about $200 for higher earners. The measure would cost the state $221 million over the next two years.

"You can say that it's not enough, but anytime you can put more money in the pockets of middle-class families, we have to defend that," said House Taxes Chairman Greg Davids, R-Preston, after releasing a brief overview of the plan in committee on Monday.

Dayton quickly called a news conference where he said that "Once again, the Republicans just simply can't help themselves at providing the richest Minnesotans with more benefits than they provide to middle-income families, working families."

House Republicans released their proposal to lower income taxes with no fanfare on Saturday night, and it included an array of modest tax breaks for companies and investors.

The proposal stands in stark contrast to Dayton's plan, which leaves middle-class Minnesotans mostly unscathed but raises taxes steeply on the state's highest earners. With two months to go in the legislative session, the two sides appear to be moving in opposite directions.

"I don't know whether the legislators just don't understand what it is they're doing or that they understand and are not being entirely candid with the people of Minnesota," Dayton said.

"I don't know which is worse."

Under the Republican proposal, Minnesotans with taxable income below $75,000 would see their taxes go down $53, according to the Minnesota Department of Revenue. Those who earn less than $10,000 would save $3 a year. High-end earners would save up to $200.

Republicans would also reduce taxes for investments in research and development and cut nearly $50 million in taxes for owners of commercial and industrial properties.

One tax increase

Despite months of insisting they could balance without tax hikes, Republicans slipped in a proposed $18 million tax increase on chewing tobacco.

While Davids offered a spirited defense of other components of the tax proposal, his enthusiasm sagged when discussing the chewing tobacco tax.

"I am going to have to look at it," he said. "That's why you have hearings."

He then defended the concept, saying that on the whole, the GOP budget would lower taxes.

State Rep. King Banaian, R-St. Cloud, and other Republicans, were surprised to see it in the bill.

"Well, I hope we don't have to vote on it," Banaian said. "I don't like that particular idea. We will try not to raise any taxes at all."

With the state facing a $5 billion projected shortfall, there would be pain, too -- mostly for those who live in traditional DFL strongholds.

As part of their overall budget cuts, House Republicans would slash funding for cities and counties, leaving the state's local governments to largely fend for themselves.

The plan would cut nearly $300 million from local government aid by cutting half of metro suburbs' state assistance and a fourth of the aid for Minneapolis, St. Paul and Duluth. By 2013, the plan would eliminate state aid to metro suburbs and by 2015, city funding would be gone.

But the proposal largely spares non-metro cities, many represented by Republicans, from aid reductions and pits older suburbs and the urban core against smaller cities.

Democrats see pure politics in the policy.

"I don't have any doubt that this is a politically motivated document," said House Minority Leader Paul Thissen, DFL-Minneapolis.

Minneapolis, St. Paul and Duluth would lose all aid in four years. Rochester, a growing swing area with GOP representation in the Minnesota House and Senate, would be spared because it is not a "first class city." The chairwoman of the House Property and Local Tax Division said her local aid bill simply rights a historic wrong.

"Forty years of Democrat politics meant that most of the money was going to big Democrat cities. ... It's looking at history and saying, 'What have we wrought here?'" said Rep. Linda Runbeck, R-Circle Pines.

The heat of grinding budget negotiations has revealed that some GOP legislators are more in line with Dayton, saying cities should be spared cuts.

"LGA should be a priority, not a target for cuts. It is important to the economic health of many cities and the entire state," state Rep. Rod Hamilton, R-Mountain Lake, wrote in a Star Tribune opinion piece Sunday.

Asked Monday if he would vote for the aid package his caucus produced, Hamilton said: "Those are conversations that we are having."

Baird Helgeson • 651-222-1288